You know Jeff Bezos' net worth is about $185B?
But let's make one thing clear: Jeff Bezos definitely doesn't have anywhere near $185B sitting in his bank account.
So... where is all his money?
Over 90% of his net worth is in Amazon stock alone*.
The same goes for
Elon Musk (over 92% of assets comprised of stake in Tesla and SpaceX)*...
Bill Gates (over ~58% of assets comprised of investments in public companies)*...
Most wealthy people own assets which rise in value. That's in large part why they're so wealthy and why they keep getting wealthier.
And if you think they're gaming the system... nothing is stopping you from doing exactly the same thing.
Instead of buying an Xbox, you can buy Tesla stock.
An Xbox will probably never be worth more than it is worth right now...
... There's a good chance Tesla stock will only continue to rise in value over the course of our lifetime.**
Of course, there's also a chance that Tesla will go bankrupt and you lose everything you invested…
Safer investments could be:
- Low-fee index funds, like those from Vanguard**** or Fidelity.
- Real estate... buying your house or apartment instead of renting it could make a world of difference for your net worth if you do things the right way.
There's one big reason millionaires and billionaires don't have a lot of cash in their banks accounts: cash loses value — it's called inflation.
Keeping a lot of savings in your bank account is literally like leaving that money to burn away slowly.
... and buying things that don't make you money is like inflation on steroids:
If all goes well, inflation makes your cash 2% less valuable every year. If you buy a brand new car — even from a brand that is known for having great resale value — you can expect to sell it for only about 50% of what you bought it for after just 5 years***.
Buying novelty stuff is almost always a very bad investment. Maybe the happiness the item brings you outweighs the money you lose, but don't ever kid yourself: most "cool" gadgets you buy will not make you financially richer.
Long story short: appreciating assets make you richer, buying stupid stuff does not.
Thank you so much for reading this post!
* source: Bloomberg Billionaires Index (retrieved November 2020)
** full disclosure: I am a Tesla shareholder (TSLA)
*** source: "Cars That Hold Their Value", iSeeCars.com (retrieved November 2020)
**** full disclosure: I have a stake in the Vanguard Information Technology Index Fund (VGT)